## Facts

- Ellwood Group and Uddeholm Tooling AB formed a joint venture, Ellwood-Uddeholm Steel Company (EUS), to produce specialty steel ingots for purchase by the venturers.
- The parties executed steel purchase and related agreements containing a rebate provision tied to ingot purchase volume.
- A key dispute arose over whether Ellwood could claim rebates based on its resale of EUS ingots to third parties or only on ingots purchased for Ellwood’s own use.
- Uddeholm alleged Ellwood improperly claimed rebates, breached fiduciary duties arising from the joint venture, misappropriated Uddeholm trade secrets, and participated in a civil conspiracy.
- In the ensuing federal litigation, the district court found the rebate provisions ambiguous under Pennsylvania law and permitted extrinsic evidence of intent and performance.
- The district court admitted an affidavit from Bo Jonsson, a former Uddeholm president who later died, under Federal Rule of Evidence 807 to address disputed meeting statements; it also required redaction of portions of an internal memorandum before admission.
- The jury returned a verdict for Uddeholm on the contract claim and several tort theories, with damages and related interest/offset determinations.

## Issues

1. Whether the rebate provisions were ambiguous as a matter of Pennsylvania contract law, permitting extrinsic evidence on meaning.
2. Whether the district court erred by instructing that Ellwood bore the burden to establish the meaning of ambiguous contract terms due to a fiduciary relationship.
3. Whether breach of fiduciary duty and trade secret misappropriation claims were barred as duplicative of the contract claim.
4. Whether civil conspiracy liability could stand where the verdict did not establish liability of another conspirator.
5. Whether the district court abused its discretion in admitting the Jonsson affidavit under Federal Rule of Evidence 807 and in ordering redaction of an internal memorandum.
6. How certain damages components (including disputed rebate periods) and interest on post-venture amounts should be handled in light of the rulings.

## Decision

- The court affirmed the district court’s determination that the contract was ambiguous regarding rebates on third-party sales and that extrinsic evidence was admissible.
- The court held the jury instruction improperly shifted the burden of proving contract meaning to Ellwood based on fiduciary status.
- The court vacated the contract verdict and remanded for a new trial on the contract claim.
- The court largely permitted the tort theories to proceed because they could rest on duties independent of the contract (including fiduciary and confidentiality obligations).
- The court set aside the civil conspiracy determination to the extent it depended on a conspiracy without another liable conspirator.
- The court affirmed the evidentiary rulings admitting the Jonsson affidavit under Rule 807 and allowing redactions of the internal memorandum.
- The court remanded for further proceedings consistent with its contract, damages, and interest analyses.

## Legal Principles

- A contract is ambiguous under Pennsylvania law when it is reasonably susceptible to more than one meaning; ambiguity permits consideration of extrinsic evidence of intent, negotiation history, and course of performance.
- A fiduciary relationship between joint venturers does not, by itself, shift the burden of proof on contract interpretation from the plaintiff to the defendant.
- Pennsylvania law permits tort claims alongside contract claims when the asserted duties arise independently of the contract, including fiduciary duties inherent in a joint venture and obligations not to misuse trade secrets.
- Civil conspiracy requires concerted action by at least two actors; liability cannot rest on a conspiracy theory if the verdict establishes no other conspirator’s liability.
- Federal Rule of Evidence 807 permits admission of hearsay with equivalent guarantees of trustworthiness when it is material, more probative than reasonably obtainable evidence, and admission serves the interests of justice; admission is reviewed for abuse of discretion.
- Trial courts have broad discretion to redact otherwise admissible documents to exclude inadmissible or unfairly prejudicial matter.

## Conclusion

The Third Circuit upheld the finding of contractual ambiguity and key evidentiary rulings, but ordered a new trial on the contract claim because the jury was wrongly instructed that fiduciary status shifted the burden of proving contract meaning to Ellwood; it also limited the conspiracy outcome and remanded for further proceedings on contract-related remedies and calculations.


Bohler-Uddeholm Am., Inc. v. Ellwood Grp., Inc., 247 F.3d 79 (3d Cir. 2001)